GATX
Annual Report 2004

Plain-text annual report

G A T X A n n u a l R e p o r t 2 0 0 4 R E A L G A T X A T A G L A N C E M A R K E T P O S I T I O N S T R E N G T H S R A I L R A I L Own, manage, or have an interest in approximately 106 years experience in railcar leasing. A leader 168,000 railcars worldwide. One of the largest tank in full-service leasing. Expertise in specialized car lessors in North America. Full-service mainte- railcars. Growing international presence. Strong nance network in North America and Europe. Leading customer relationships. service provider to shippers in chemical, petroleum, and food industries. A I R A I R Own, manage, or have an interest in approximately Over 35 years of industry experience. Narrowbody 229 commercial aircraft. Own 50% interest in one of fleet with a five-year weighted average age. Extensive the world’s largest aircraft engine lessors. international presence. Sizeable customer base. S P E C I A L T Y S P E C I A L T Y Growing shipping/marine portfolio with shipping Strong asset valuation and residual value exper- pool operators. Portfolio of diversified assets tise. Extensive asset management capability and managed for third party owners. Provide asset man- experience. Strong relationships with asset owners agement, advisory, and remarketing services to and secondary market participants. diverse investors. G A T X C O R P O R A T I O N P R O V I D E S L E A S E F I N A N C I N G A N D R E L A T E D S E R V I C E S T O C U S T O M E R S O P E R A T I N G R A I L , A I R , M A R I N E , A N D O T H E R T A R G E T E D A S S E T S . G A T X 2 0 0 4 2 0 0 4 H I G H L I G H T S S T R A T E G Y R A I L R A I L Utilization of North American fleet improved from 93% to Capitalize on strengthening North American market 98%. Strong investment activity with more than 6,200 by maximizing revenue from existing fleet. Grow the railcars acquired in North America. Purchased remain- core fleet through new car purchases, secondary market ing 50% interest in locomotive leasing partnership. fleet acquisitions, and sale/leaseback transactions with customers. Increase efficiency of railcar main- A I R tenance process. A I R Maintained nearly 100% utilization on owned fleet. Took Improve profitability by expanding managed and part- delivery of three new aircraft and purchased four air- nered assets. Maintain high fleet utilization and craft in secondary market. Completed all scheduled effectively manage remarketing calendar for both owned renewals with minimal downtime. and managed aircraft. S P E C I A L T Y S P E C I A L T Y Strong performance of shipping/marine joint ventures. Continue to optimize value of owned and managed port- Continued solid remarketing gains. Improved credit folios. Pursue and develop new investments in ship- quality of portfolio. Lowered SG&A substantially. ping and marine assets. Invest in targeted equipment assets in which GATX has high level of expertise. G A T X I S F O C U S E D O N P R O V I D I N G Q U A L I T Y A S S E T S A N D S E R V I C E S T O C U S T O M E R S A R O U N D T H E W O R L D . 11 F I N A N C I A L H I G H L I G H T S I N M I L L I O N S , E X C E P T P E R S H A R E D A T A 2004 2003 2002 Gross income $1,231.4 $1,100.4 $1,030.2 Income from continuing operations before cumulative effect of accounting change Income from discontinued operations Income before cumulative effect of accounting change Net income Per share diluted income 158.5 11.1 169.6 169.6 61.7 15.2 76.9 76.9 24.3 10.9 35.2 0.3 before cumulative effect of accounting change $ 3.04 $ 1.53 $ 0.72 Per share diluted net income 3.04 1.53 — S O L I D Income per share Cash from continuing operations and portfolio proceeds* $ per diluted share $ millions cash from continuing operations portfolio proceeds 2000 2001 2002 2003 2004 2000 2001 2002 2003 2004 $3.56 $472 $727 $3.04 $589 $541 $1.37 $1.53 – $209 $99 $209 $267 $302 $356 Portfolio investments and capital expenditures* $ millions 2000 2001 2002 2003 2004 GATX asset mix balance sheet and off balance sheet assets as of 12/31/04 Rail Air 57% 31% Specialty 7% Corporate & Other 5% GATX Rail North American owned railcar utilization utilization as of 12/31 2000 2001 2002 2003 2004 $1,499 $1,360 $1,018 $629 $760 92% 90% 90% 93% 98% GATX-owned aircraft portfolio by asset type as of 12/31/04 A320 family B737 family 53% 35% B757 7% B717 2% MD-80 family regionals 1% 1% other 1% *excluding GATX Technology Services in all years and GATX Integrated Solutions Group in 2000-2002 (discontinued operations) G A T X 2 0 0 4 2 D E A R S H A R E H O L D E R S R O N A L D H. Z E C H , C H A I R M A N A N D C E O I am pleased with the progress GATX made in 2004 and proud of what our people accomplished. After three very challenging years, 2004 felt like the beginning of a return to normalcy with an increased focus on growth. In 2004, the rail industry improved significantly as order backlogs trended up at railcar manufacturers, and shipments and carloadings on North American rail- roads increased in all our key markets. With the strengthening rail market, we increased utilization of the rail fleet from 93% to 98% during the year. To meet demand, we took more than 1,300 railcars from inventory and put them into active service. And with a stronger market, we made significant new fleet investments, acquiring 6,200 cars, both new and in the secondary market, and increased our investment in our locomotive fleet. We also saw a rise in lease turbulence, our Air group continued to maintain high fleet utilization and managed 50 aircraft transitions with little downtime. Lease rates, particularly on the newer, narrowbody aircraft that make up a signif- icant portion of our fleet, returned to levels not seen since prior to 9/11. While this is certainly a positive note, risks in this business remain, and our Air group continues its diligence in monitoring and managing both our and our partners’ fleets. In 2005, we will continue to pursue new management and partnership opportunities and focus on maintaining a high level of fleet utilization while increasing lease rates and profitability. Our Specialty portfolio again contributed nicely to our bottom line in 2004 — and we expect it to do so for many years to come. The largest segment of our Specialty portfolio is our shipping and marine joint ventures, which performed particularly well as worldwide demand for dry bulk items and chemicals increased, driving cargo rates and vessel demand higher. The Specialty portfolio quality improved dramatically in 2004, and we had another solid year from remarketing income. We will continue to pursue new investments in shipping and marine and other renewal rates for the first time in several years targeted assets in 2005. and expect that positive trend to continue in 2005. Our European units made progress in operating The results at American Steamship Company (ASC), our profitability and also enhanced their business Great Lakes shipping operation, also reflected models. In 2005, we will build on our momentum by the healthier North American economy and high demand continuing to maximize the value of our existing for iron ore and other core industrial materials. railcars, improve efficiency in maintenance, and ASC has improved efficiency and utilization, and, in profitably grow the fleet. 2005, we expect ASC to further capitalize on a strong In spite of significant growth in global revenue pas- shipping market. senger miles, the air market remained volatile As the positive momentum clearly began to take hold in in 2004, and airlines, particularly North American 2004, I took time to reflect on the progress we have air carriers, continued to struggle. Through this made in recent years and on management transition. 3 admirably, and brings financial expertise, strategic thinking, incisive decision making, strong leader- ship, and real shareholder commitment to his new role. Together with Bob Lyons, our new Chief Financial Officer, the heads of our businesses — Jim Earl at Rail, Alan Coe at Air, Curt Glenn at Specialty and B R I A N K E N N E Y R O N Z E C H Jerry Welsch at ASC — and the rest of our leadership team, I am confident Brian will capitalize on the many We weathered the storm of the economic downturn and the impact of 9/11 on our Air portfolio, refocused opportunities before GATX. the Company on our core businesses, and improved our In closing, I would like to thank our Board of credit profile. GATX is now positioned to take advan- Directors for their strong commitment to GATX, their tage of the upturn in our markets. As we moved into guidance and support through difficult periods, and a period of renewed growth, I concluded the time is the priority they have always placed on integrity right for the Company to take its next steps with and good governance. I also want to welcome two new a management team that would be in place for many years. independent Board members to GATX — Casey Sylla, In the fall of 2004, and after extensive discussions with our Board, I announced my plans to retire in October 2005. On a personal level, after 28 years, it is not an easy decision to leave the company I have dedicated my career to and to leave colleagues that I respect and admire. Despite many changes over the years, the key elements that brought me to GATX remain today. GATX is a company with 106 years of skill and experience in providing assets that support the basic economy through the movement of people and goods. We have close relationships with our suppliers, partners, and customers, many of whom have been with us for more than 50 years. But GATX’s strongest attribute is its people — who are experienced, skilled, creative, and fun — and it has been both a pleasure and an honor to work closely with them. GATX is fortunate to have talented individuals fully ready and able to assume leadership of the Company. Chairman of the Board and President of Allstate Financial, and Mark McGrath, a recently retired Director at McKinsey and Company — who bring new per- spectives and additional expertise to the outstanding GATX Board. I would also like to thank our customers and partners for their years of support.I have enjoyed working with you and know GATX will continue to strive to ensure your success. To our employees, it is diffi- cult for me to truly express my gratitude for your hard work and dedication over the years. You are the key to success at GATX, and I know you will continue to provide your talent, energy, and creativity to our new management team. And finally, thank you to our share- holders for your continued support. I can assure you that the entire GATX team remains committed to enhanc- ing your investment. I am pleased with the Board’s decision to elect Brian R O N A L D H. Z E C H Kenney as my successor. Brian has served GATX C H A I R M A N A N D C H I E F E X E C U T I V E O F F I C E R G A T X 2 0 0 4 4 R A I L 1 . 6 M I L L I O N R A I L C A R S I N T H E N O R T H A M E R I C A N R A I L S Y S T E M . R A I L C A R S A R E O W N E D B Y R A I L R O A D S , S H I P P E R S , A N D L E S S O R S . D U E T O T H E C O M P L E X N A T U R E O F T H E A S S E T S , T A N K C A R S A R E O W N E D B Y S H I P P E R S A N D L E S S O R S . O F T H E M O R E T H A N 2 7 0 , 0 0 0 T A N K C A R S , T W O - T H I R D S A R E O W N E D B Y L E A S I N G C O M P A N I E S . G A T X O W N S M O R E T H A N 6 0 , 0 0 0 T A N K C A R S . P R I M A R Y C O M P E T I T O R S A R E U N I O N T A N K C A R C O M P A N Y, G E N E R A L E L E C T R I C R A I L C A R S E R V I C E S C O R P O R A T I O N , A N D V A R I O U S O T H E R L E S S O R S . R E A L A I R M O R E T H A N 1 6 , 0 0 0 C O M M E R C I A L J E T A I R C R A F T I N S E R V I C E W O R L D W I D E . A P P R O X I M A T E L Y 1 0 , 0 0 0 A R E N A R R O W B O D Y A I R C R A F T . M A I N C O M P E T I T O R S A R E G E C O M M E R C I A L A V I A T I O N S E R V I C E S , I N T E R N A T I O N A L L E A S E F I N A N C E C O R P O R A T I O N , O T H E R L E A S I N G C O M P A N I E S , A N D L E A S I N G S U B S I D I A R I E S O F C O M M E R C I A L B A N K S . S P E C I A L T Y O W N E D A N D M A N A G E D P O R T F O L I O S O F D I V E R S E I N D U S T R I A L E Q U I P M E N T I N C L U D I N G M A R I N E A S S E T S . P R I N C I P A L C O M P E T I T O R S A R E C A P T I V E L E A S I N G C O M P A N I E S O F E Q U I P M E N T M A N U F A C T U R E R S , L E A S I N G S U B S I D I A R I E S O F C O M M E R C I A L B A N K S , I N D E P E N D E N T L E A S I N G C O M P A N I E S , L E A S E B R O K E R S , A N D I N V E S T M E N T B A N K S . 5 O U R F L E E T O F S P E C I A L I Z E D T A N K C A R S S E R V E S T H E T R A N S P O R T A T I O N R E Q U I R E M E N T S O F T H E C H E M I C A L , F O O D , A N D P E T R O L E U M I N D U S T R I E S I N N O R T H A M E R I C A . S T R O N G Miles of railcars along the tracks; commercial air- to lease railcars to shippers and railroads. In 2004, craft traversing the globe; ships churning across the with owned and managed fleets of approximately 168,000 sea and the Great Lakes — the assets of GATX support railcars, 874 locomotives, 229 commercial aircraft, and the economic infrastructure of North America and the a growing fleet of marine vessels, GATX has a leading world. These assets are also the foundation upon which presence in the transportation leasing industry. GATX Corporation was built. GATX was founded in 1898 7 W E K N O W O U R A S S E T S I N S I D E A N D O U T , A N D W E W O R K W I T H O U R C U S T O M E R S T O F I N D T H E R I G H T S O L U T I O N S T O M E E T T H E I R P A R - T I C U L A R N E E D S . G A T X 2 0 0 4 8 E X P E R I E N C E D E X P E R I E N C E D At GATX, our day-to-day business appears simple: buy the weekend — a great deal of skill, experience, and a railcar or aircraft, lease it to a customer. But expertise stands behind each asset. With 106 years these assets are vital to the economy and our lives — of rail leasing expertise, 37 years in commercial whether it’s a tank car carrying chemicals to sup- aircraft, and more than 30 years in shipping, GATX port manufacturing, an inland vessel moving iron ore knows and understands each individual asset and each across the Great Lakes for a revitalized steel market those assets serve. industry, or people in an aircraft flying home for 9 L A S T I N G O U R O B J E C T I V E I S T O P R O V I D E A S A F E , R E L I A B L E C A R T H A T C A N S E R V E O U R C U S T O M E R S N O W A N D F O R Y E A R S T O C O M E . G A T X 2 0 0 4 10 GATX’s assets are long-lived. Properly maintained, more evident than in our rail maintenance network. GATX a railcar can last 30 to 50 years, an aircraft service covers the spectrum — from a fleet of mobile 25 years, and a ship upwards of 50 years. And our repair units providing on-the-spot field repairs, customers, many of whom have been with GATX for to in-shop cleaning, lining, painting, repair, and decades, rely on us for crucial services that help inspection, to regulatory testing and training. extend the useful life of the asset. Nowhere is this 11 I N T E G R A L O U R A S S E T S A R E E S S E N T I A L T O O U R C U S T O M E R S , A N D W E A R E C O M - M I T T E D T O P R O V I D I N G T H E R I G H T A S S E T A T T H E R I G H T T I M E A T T H E R I G H T P R I C E . G A T X 2 0 0 4 12 With tank cars, freight cars, locomotives, aircraft, passenger air carriers. Our tank cars support the and marine vessels, GATX’s assets are core to the chemical, petroleum, and agriculture industries, and operations of a diverse customer base. With a focus on our railcars serve the North American and European single-aisle Boeing 737 Next Generation and Airbus railways. These assets are widely used and are criti- A320 aircraft, GATX provides the type of aircraft cal to a wide range of companies. that serve as the workhorses of many of the world’s 13 W I T H A B R O A D M A R K E T F O R O U R A S S E T S , W E C A N R E - L E A S E O R R E M A R - K E T — O R E V E N M O D I F Y O R R E C O N F I G U R E — T H E A S S E T S F O R N E W C U S T O M E R S O R T H E C H A N G I N G N E E D S O F O U R E X I S T I N G C U S T O M E R S . F L E X I B L E What appears simple can be complex — but by knowing Beyond the physical configuration, GATX also works our assets, we take that complexity and turn it into with the customer to find the appropriate asset flexibility to meet our customers’ needs. With more financing solution. And we have taken these skills than 60 different types of tank cars, numerous abroad, with a growing rail presence in Europe and freight cars, locomotives, and aircraft configura- air assets leased throughout the world. In adapting tions, and a diverse pool of marine assets, GATX our assets to the changing needs of the market, GATX employs engineers and technical experts to customize provides the flexibility and customization necessary our assets for our customers’ particular requirements. to keep our customers moving. 15 D I R E C T O R S A N D O F F I C E R S B O A R D O F D I R E C T O R S Rod F. Dammeyer (1,2) President CAC, L.L.C. James M. Denny (2,3) Retired: Former Vice Chairman Sears, Roebuck and Co. Richard Fairbanks (3) Counselor Center for Strategic & International Studies Deborah M. Fretz (1) President and Chief Executive Officer Sunoco Logistics Partners, L.P. Miles L. Marsh (2,3) Former Chairman and Chief Executive Officer Fort James Corporation Mark G. McGrath (3) Retired: Former Director McKinsey & Company Michael E. Murphy (1,2) Retired: Former Vice Chairman and Chief Administrative Officer Sara Lee Corporation Casey J. Sylla (1) Chairman and President Allstate Financial Ronald H. Zech Chairman and Chief Executive Officer GATX Corporation Brian A. Kenney President GATX Corporation (1) Member, Audit Committee (2) Member, Compensation Committee (3) Member, Governance Committee O F F I C E R S Ronald H. Zech Chairman and Chief Executive Officer Brian A. Kenney President Robert C. Lyons Vice President and Chief Financial Officer Ronald J. Ciancio Senior Vice President, General Counsel and Secretary Gail L. Duddy Senior Vice President — Human Resources William J. Hasek Vice President and Treasurer William M. Muckian Vice President, Controller and Chief Accounting Officer Susan A. Noack Vice President and Chief Risk Officer S. Yvonne Scott Vice President and Chief Information Officer B U S I N E S S E X E C U T I V E S James F. Earl GATX Rail Alan C. Coe GATX Air Curt F. Glenn GATX Specialty Finance Jerome K. Welsch, Jr. American Steamship Company For more information on GATX’s Corporate Governance, see www.gatx.com — Investor Relations — Corporate Governance. As required by Section 303A.12(a) of the New York Stock Exchange (the “Exchange”) Listed Company Manual, the Company’s Chief Executive Officer has certified to the Exchange that, as of the date of the certification, he was not aware of any violation by the Company of the Exchange’s Corporate Governance listing standards. In addition, the Company’s Chief Executive Officer and Chief Financial Officers have each filed with the Securities and Exchange Commission all required certifications pursuant to §§ 302 and 906 of the Sarbanes-Oxley Act of 2002. G A T X 2 0 0 4 16 C O R P O R A T E I N F O R M A T I O N A N N U A L M E E T I N G Friday, April 22, 2005, 9:00 a.m. Central Time Northern Trust Company Assembly Room, Sixth Floor 50 South LaSalle Street, Chicago, Illinois 60675 GATX Corporation welcomes and encourages questions and comments from its shareholders, potential investors, financial profes- sionals, and the public at large. To better serve interested parties, the following GATX personnel may be contacted by letter, telephone, e-mail, and/or fax. S H A R E H O L D E R I N Q U I R I E S Inquiries regarding dividend checks, the dividend reinvestment plan, stock certificates, replacement of lost certificates, address changes, account consolidation, transfer procedures, and year-end tax information should be addressed to GATX Corporation’s Transfer Agent and Registrar: Mellon Investor Services LLC Overpeck Centre 85 Challenge Road, Ridgefield Park, New Jersey 07660 Telephone: (866) 767-6259 TDD for Hearing Impaired: (800) 231-5469 Foreign Shareholders: (201) 329-8660 TDD Foreign Shareholders: (201) 329-8354 Internet: www.melloninvestor.com I N F O R M A T I O N R E L A T I N G T O S H A R E H O L D E R O W N E R S H I P , D I V I D E N D P A Y M E N T S , O R S H A R E T R A N S F E R S Lisa M. Ibarra, Assistant Secretary Telephone: (312) 621-6603 Fax: (312) 621-6647 E-mail: lisa.ibarra@gatx.com F I N A N C I A L I N F O R M A T I O N A N D P R E S S R E L E A S E S A copy of the Company’s Annual Report on Form 10-K for 2004 and selected other information are available without charge. Corporate information and press releases may be found at GATX’s website, www.gatx.com. Requests for information or brochures may be made through the site, and many GATX publications may be directly viewed or downloaded. A variety of current and histori- cal financial information, press releases, and photographs are also available at this site. T O R E Q U E S T P U B L I S H E D F I N A N C I A L I N F O R M A T I O N A N D F I N A N C I A L R E P O R T S GATX Corporation Investor Relations Department 500 West Monroe Street, Chicago, Illinois 60661-3676 Telephone: (800) 428-8161 Fax: (312) 621-6648 E-mail: ir@gatx.com A U T O M A T E D R E Q U E S T L I N E F O R M A T E R I A L S (312) 621-6300 A N A L Y S T S , I N S T I T U T I O N A L S H A R E H O L D E R S , A N D F I N A N C I A L C O M M U N I T Y P R O F E S S I O N A L S ’ I N Q U I R I E S Rhonda S. Johnson, Director, Investor Relations Telephone: (312) 621-6262 Fax: (312) 621-6648 E-mail: rhonda.johnson@gatx.com I N D I V I D U A L I N V E S T O R S ’ I N Q U I R I E S Irma Dominguez, Investor Relations Coordinator Telephone: (312) 621-8799 Fax: (312) 621-6648 E-mail: irma.dominguez@gatx.com Q U E S T I O N S R E G A R D I N G S A L E S , S E R V I C E , L E A S E I N F O R M A T I O N , O R C U S T O M E R S O L U T I O N S GATX Rail: (312) 621-6200 GATX Air: (415) 955-3200 GATX Specialty Finance: (415) 955-3200 American Steamship Company: (716) 635-0222 I N D E P E N D E N T R E G I S T E R E D P U B L I C A C C O U N T I N G F I R M Ernst & Young LLP F O R W A R D - L O O K I N G S T A T E M E N T S Certain statements within this document may constitute forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. These statements are identified by words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “predict,” or “project” and similar expressions. This information may involve risks and uncertainties that could cause actual results to differ mate- rially from the forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Risks and uncertainties include, but are not limited to, general economic conditions; aircraft and railcar lease rate and utiliza- tion levels; conditions in the capital markets and the potential for a downgrade in GATX’s or GATX Financial Corp.’s credit rating, either of which could have an effect on the Company’s borrowing costs or ability to access the markets for commercial paper or secured and unsecured debt; dynamics affecting customers within the chemical, petroleum and food industries; regulatory rulings that may affect the economic value of assets; competi- tors in the rail and air markets who may have access to capital at lower costs than GATX; additional potential write-downs and/or provisions within GATX’s portfolio; impaired asset charges; and general market conditions in the rail, air, and other large-ticket industries. n a m r e t s e W e i l r a h C y b s t i a r t r o P l e b e o B d d o T y b y h p a r g o t o h P i m o c . n o s d d a . w w w i n o s d d A y b n g s e D i T I M E L E S S G A T X C O R P O R A T I O N 5 0 0 W E S T M O N R O E S T R E E T , C H I C A G O , I L L I N O I S 6 0 6 6 1 - 3 6 7 6 ( 3 1 2 ) 6 2 1 - 6 2 0 0 ( 8 0 0 ) 4 2 8 - 8 1 6 1 W W W . G A T X . C O M N Y S E : G M T 

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